Foreign Relations of the United States Diplomatic Papers, 1938, The British Commonwealth, Europe, Near East, and Africa, Volume II

611.6831/203

The Minister in Greece (MacVeagh) to the Secretary of State

No. 2298

Athens, June 10, 1938.
[Received June 21.]

Sir: With reference to my despatch No. 2258 of May 14, 1938, and my telegram No. 32 of May 26, 12 noon,²² I have the honor to submit herewith the Greek draft of the modus vivendi in commercial matters together with explanatory notes by the competent Greek authorities. As the Department will observe, parts of this draft have been drawn from the Department’s first draft, submitted to the Greek Government by this Legation on July 19, 1937, and others from the Department’s second draft similarly submitted on April 28, 1938, while others again represent Greek modifications or additions.

In Article I, paragraph 1 is from the Department’s first draft; paragraph 2 from the second.

In Article II, paragraph 1 is from the Department’s second draft; but paragraphs 2 and 3, while introducing the representative period principle from the Department’s first draft, attempt to accommodate it to the present Greek system of import control; paragraph 4 is a rephrasing in more general terms of paragraph 3 (d) in the Department’s second draft; and paragraph 5 is paragraph 4 of that draft.

In Article III, paragraph (a) reproduces the corresponding paragraph of the Department’s second draft with slight verbal differences and one proviso which would appear unexceptionable; paragraph (b) represents paragraph (b) of the Department’s second draft, but has been redrawn to express the principle laid down in paragraph 5 of the Department’s first draft; paragraph (c) is the same as paragraph (c) of the Department’s second draft.

In Article IV, the redrafting of the corresponding article of the Department’s second draft has been so thorough-going as to draw most of the latter’s teeth. However, situations are conceivable in which the present draft might prove useful and I have therefore thought best to retain it for what it may be worth, instead of dropping it altogether as authorized in the Department’s instruction No. 454 of April 13, 1938.

In Article V, all the paragraphs are the same as the corresponding paragraphs of Article V of the Department’s second draft, except that to paragraph 2 there has been added a clause extending reciprocally to the Balkan Entente²³ the exceptions granted in the case of Cuba, etc.

The Minister of National Economy, Mr. Arvanitis, who is also President of the Commission responsible for the enclosed draft, has emphasized to me the tentative nature of Article II in so far as its wording may have to be altered when practical methods for applying the representative period principle have been agreed on. While giving him no assurance that a return to this principle will itself be acceptable to the Department, I have acceded to his wish that the Legation examine, in collaboration with his Ministry, the practical possibilities in this connection. As a result, the Legation has formed some ideas in regard to Article II which the Department may care to have, should it find the Greek proposals acceptable in principle.

In this connection, the Department will not fail to note the distinction drawn in Article II between general quotas and special licenses or extra quotas. This distinction is of course in line with present Greek practice, and the Greek position is that no discrimination is involved when total imports of a given commodity are limited by a quota divided among local importers who are then free to purchase from any country up to the limit of their allotments. Theoretically this position may be sound, but in actual practice imports from Germany of general quota products have not been, and are not now limited to such quotas, while imports from the United States are held very closely to the proportion of their allotments which importers desire to utilize for their American goods. Though the present wording of Article II, paragraph 1, may possibly be construed to prohibit such discrimination, the extent to which the Greeks are accustomed to the practice would seem to make it the part of wisdom to cover the point more specifically in any final draft.

The Legation also feels that in any final draft of this article a more adequate definition should be given to the “special or individual licenses or extra quotas” mentioned in Part B of paragraph 2, making clear that these cover all quota allotments in excess of the general quotas mentioned above.

Finally, the Legation feels, after thorough-going investigation into the practical aspects, that the only application of the representative period idea which gives definite promise of aid to American products and at the same time fits into the existing Greek quota machinery, is to relate it to the 15 “global” quotas which Greece has already established for certain imports from the United States. The present Greek plan of setting up a separate quota based on the representative period for every article subjected to special or individual licensing would seem not only to be terrifically cumbersome but also to provide an endlessly fertile ground for manipulation, error and dispute. The Director General of the Ministry of National Economy appears to favor the three years 1928–1930 as a representative period, and this seems reasonable. The present group of 15 “global” quotas total about 190 million drachmas in value as actually applied during the calendar year 1937. During the same period, Greek imports of American commodities subject to quantitative limitation were 368 million drachmas less than our 1928–1930 share (8.06 percent) in total imports of this category of products would have given us. By increasing the 15 “global” quotas in question for the next 12 months to figures more nearly commensurate with current demand, and using the balance of the 368 million drachma “quota shortage” to cover new developments during the same period, our shortage for 1937 could be made up.

The above scheme could be covered in general terms in the modus vivendi more briefly than the present proposal outlined in Part B of paragraph 2, Article II, and I enclose with this despatch a tentative wording for this paragraph along these lines. In case it or something like it were adopted, paragraph 3 of the same article of the present Greek draft would become superfluous.

Respectfully yours,

Lincoln MacVeagh

[Enclosure 1]

Tentative Wording of Portions of Article 2

In the event that either Government regulates the importation into its territory or sales therein of any article in which the other country has an interest, by import licenses or permits, or by quota allotments in excess of the general import or customs quotas covered by paragraph 1 of this article, or subjects to specified conditions the importation of articles for which general quotas have been fixed, the Government taking such action shall:

(a) Accord to the other country a share of the total permissible importation of all such products of that country as are not specifically exempted from quota and import license requirements involving quantitative restrictions, which shall not be less than the share in the total trade in all such products which that country enjoyed in a previous representative period. Such representative period, as well as the share of the other country therein and the method of applying such share to each future quota period, shall be established by agreement between the two Governments prior to the beginning of such quota period.

(b) Administer such regulations so as not to discriminate against importation from the other country either as to the persons permitted to import, or by delays in the issuance of license or allotments, or as to the individual articles which may be imported, or as to any other specified conditions of importation.

(c) Inform the other Government currently, upon request, of all licenses and allotments for the importation of its products which may be granted or rejected under the provisions of this paragraph.

[Enclosure 2—Translation]

Greek Draft of Modus Vivendi²⁴

I

1. In respect of import, export and other duties and charges affecting commerce, as well as in respect of transit warehousing and other facilities, the United States of America will accord to the Kingdom of Greece and the Kingdom of Greece will accord to the United States of America, its territories and possessions, unconditional most-favored-nation treatment.

2. Accordingly, it is understood that with respect to customs duties or charges of any kind imposed on or in connection with importation, or exportation, and with respect to the method of levying such duties or charges, and with respect to all rules and formalities in connection with importation or exportation, and with respect to all laws or regulations affecting the sale taxation or use of imported goods within the country, any advantage, favor privilege or immunity which has been or may hereafter be granted by the United States of America or the Kingdom of Greece to any article originating in or destined for any third country, shall be accorded immediately and unconditionally to the like article originating in or destined for the Kingdom of Greece or the United States of America respectively.

II

1. Neither the Government of United States of America nor the Royal Hellenic Government shall regulate by import licenses or permits the importation into its territory of any article in which the other country has an interest, or by any method maintain limitation or control of the amount of importation of any such article, unless similar action is taken with respect to the importation of such article from all other countries.

2. If such regulations or restrictions of imports of such article are established or maintained the two Governments agree as follows:

A. In the event that either Government regulates the total quantity of importations into its territory or sales therein of any article, in which the other country has an interest, by establishing or maintaining general import or customs quotas, the Government taking such action shall:

(a) Establish in accordance [advance], and inform the other Government of the total amount permitted to be imported from all countries during any specified period, which shall not be shorter than three months.

(b) Impose no limitation on the part of such total amount which may be imported from the other country by persons authorised to import such article and within the general quotas allocated to them for such article.

(c) Administer such regulations so as not to discriminate against importation from the other country, and in no manner directly or indirectly, influence importers regarding the country from which they shall import any such article.

B. (a) In the event that either Government regulates the importations into the territory or sales therein of any article, in which the other country has an interest, by granting special or individual licences or extra quotas, or submitting to special conditions the import of articles for which general quotas are granted the share of the other country on the total permissible importation of any such product during a specified period shall not be less than the share in the trade in such product which such other country enjoyed in a previous “representative period”. Such “representative period” as well as the share of the other country shall be established by agreement between the two Governments.

(b) In order to establish the “total permissible importation” of products, with respect to which importation is permitted by special licences or extra quotas during a specified period, on which total importation the share of the other country shall be calculated, the total quantity of the same product shall be taken, which has been actually imported during the previous equal period. In fixing such previous equal period account shall be taken of seasonal variations.

(c) The total amount of each product so established, for which import licences or permits shall be granted to the other country, as well as the regulations covering the issuance of such licences or permits shall be communicated to the interested Government in due course and before the beginning of the period to which they apply.

3. If either country should have an interest for the importation in the territory of the other country of articles for which no “representative period” can be established, the share of this country on the total permissible importation of such articles shall be established in each case by agreement between the two Governments.

4. If either country controls or limits the establishment of new or re-establishment of old trade connections by local importers, this control or limitation shall not be operated so as to effect discrimination against the other country.

5. The provisions of this article shall also be applicable with respect to any regulations limitation, or control imposed by either Governments upon the importation of such article at a particular rate of duty, or charge.

[The purpose of the proposed drafting of article II is:

(a) To combine the interest of establishing a non discriminating treatment of American importations in Greece with the necessity of maintaining the general system of regulations and control now in force in Greece.

(b) To endure [ensure] that any importer who has an interest for the importation of American products should be informed, in advance and in all cases, of the total amount of any article which may be imported from U. S. of America during each specified period.

In order to arrive at this result one ought to consider the differences in regulating and controlling imports now in application in Greece viz:

1. In the case of articles the importation of which is unrestricted or for which general import quotas are established, it has been considered sufficient, for the purpose, to ensure that the Government should in no way influence importers with respect to the export country, in which they may decide to use the quotas accorded to them.

2. With respect to articles for the importation of which special licences are granted individually and from case to case, or the granting of extra-quotas, is necessary, it is evident that the establishing in advance of the total permissible quantity, to be imported during any period is impossible. In order to meet this difficulty, it has been considered advisable to take as a basis, for calculating the share to be allotted to American imports, the total quantity which has been actually imported under such system during a similar period, e.g. in order to calculate the share of American imports of articles under this item during the half year, July–December 1938, the total amount of respective articles which has been imported during the half year July–December 1937 shall be taken.

With regard to the method of establishing the percentage on the total permissible imports which ought to be reserved to imports from the U. S. of America it has been thought advisable to try and find some objective basis out of which such percentage will derive automatically and without further discussions or differences of opinion.

Such basis is given by the first draft of the Government of the U. S. of America which provides for a “representative period” to be determined by agreement between the two Governments. Any other method, and especially the proposal to find by abstraction what the situation would be if no restrictions or control should exist, will give rise to endless discussions during which any opinion may be defended without the possibility of supporting it by objective facts.

The case of new articles for which such method is not applicable is provided under paragraph 3 of article II.]

III

In the event that either Government establishes or maintains, directly or indirectly, any form of control of the means of international payments, it shall, in the administration of such control:

(a) Impose no prohibitions, restrictions, conditions or delay on the transfer of payment for imported articles of the other country, or of payments necessary for and incidental to the importation of such articles, provided that such articles have been imported in accordance with the regulations in force.

(b) Establish all rates of exchange taxes and surcharges applying to exchange transactions in connection with payments for or payments necessary or incidental to the importation of articles of the other country, in conformity with the situation of the respective markets and the real value of the respective foreign exchanges and in a manner that no discrimination to the disadvantage of the other country, shall be created.

(c) Accord unconditionally, with respect to all rules and formalities applying to exchange transactions in connection with payments for or payments necessary, and incidental to the importation of articles of the other country, treatment no less favourable than that accorded in connection with the importation of the like articles of any third country.

[The proposed drafting of clause (b) of article III is considered necessary, in view of the fact that under present conditions the official rates of some foreign exchanges, as quoted in their national or even in the international exchange market, differs substantially from its real purchasing power. It is argued that a Government which, in fixing the parity of its national currency with respect to a foreign exchange, takes into account the real purchasing power of such foreign exchange, cannot be accused of a discriminatory treatment of the commerce of a third country.]

IV

In the event of purchases of supplies made by, or on account of the Government or Government monopolies or monopolies exercised by public bodies or institutions, or in the event of contracts for public works being awarded, it is agreed that the Government of each country shall not discriminate against the other country in favor of any third country. In order to determine if a discriminating action has taken place, account shall be taken of all circumstances under which the purchase has been made or the contract has been awarded.

[In drafting article IV the following facts have been taken into consideration:

It is evident that any Government of public body or institution have a principal interest to secure the best possible terms of their purchases or contracts with regard to prices, quality etc. But it is also true that public requirements and consequently public supplies are of such special nature and involve such general interests, that, even under a system of complete freedom of trade, the right of any Government to reserve for itself unlimited freedom of decision with regard to purchases and contracts has never been disputed.

We think that it cannot be denied that the considerations which may induce a Government etc. to decide for a supply are not identical with those which are taken into account by a private commercial enterprise.

What in such cases is of real interest is to ascertain if a Government which has decided for any purchase or contract has done so in order to protect their general interest or in acting with the intention to discriminate against any third Government.

Article IV, referring to all circumstances under which the purchase has been made or the contract has been awarded intends to cover the above considerations.]

V

1. The advantages now accorded or which may hereafter be accorded by the United States of America or the Kingdom of Greece to adjacent countries in order to facilitate frontier traffic, and advantages resulting from a customs union to which either the United States of America or the Kingdom of Greece may become a party, shall be excepted from the operation of this Agreement.

2. It is understood that the advantages now accorded or which may hereafter be accorded by the United States of America, its territories or possessions, the Philippine Islands, or the Panama Canal Zone to one another or to the Republic of Cuba shall be excepted from the operation of this Agreement.

It is also agreed that the advantages which may be accorded by the Kingdom of Greece to countries which are now or may hereafter be members of the “Entente Balcanique” in order to facilitate inter-Balkan economical relations shall be excepted from the operation of this agreement.

3. Subject to the requirement that, under like circumstances and conditions, there shall be no arbitrary discrimination by either country against the other country in favor of any third country, the provisions of this Agreement shall not extend to prohibitions or restrictions (1) imposed on moral or humanitarian grounds; (2) designed to protect human, animal or plant life or health; (3) relating to prison-made goods; (4) relating to the enforcement of police or revenue laws.

4. Nothing in this Agreement shall be construed to prevent the adoption of measures prohibiting or restricting the exportation of gold or silver, or to prevent the adoption of such measures as either Government may see fit with respect to the control of the export or sale for export of arms, ammunition, or implements of war, and, in exceptional circumstances, all other military supplies, and it is agreed further, that nothing in this Agreement shall be construed to prevent the adoption or enforcement of measures relating to neutrality.

IV [VI?]

The present Agreement shall replace the exchange of notes between the Government of the United States and the Government of the Kingdom of Greece of December 9, 1924, and shall become operative on this . . . . . day of . . . . . . . and shall continue in force until superseded by a more comprehensive commercial agreement or by a definitive treaty of commerce and navigation, or until denounced by either country by advance written notice of not less than thirty days.

Accept, Sir, etc., etc.,

22. Not printed.
23. Yugoslavia, Rumania, and Turkey.
24. The portions printed in brackets, following articles II, III, and IV of this draft, appear in the original in a column parallel with the text.